Lahore, March 17, 2022 (PPI-OT): The ratings reflect Pak Elektron Ltd.’s (PEL) diversified revenue stream and strong presence in Household Appliances and Power division including, Power transformers, Distribution transformers, Energy meters and Switch gears. The key factors driving the Household Appliances market are increase in technological advancement, rapid urbanization, growth in housing sector, improved living standards and surge in the need for comfort in household chores. Whereas, Power division growth drivers are linked with new electricity power projects, rehabilitation of existing power distribution networks, infrastructure developments and new commercial/ residential constructions.
Pakistan’s household appliances and Power sector is largely dependent on global raw material prices, making it susceptible to external dynamics. Amidst COVID-19 outbreak, challenging economic conditions and strong competition have proved to be an impediment to industry growth. Overall production levels of the major appliances market took a steep dip in CY20, particularly during the peak demand season when nationwide lockdown slowed down the overall economic activity and created uncertainty in industry.
During 3QCY21 Household Appliances showed recovery and highest production growth was recorded in Refrigerators by 151.87%, Air Conditioners by 73.71% as compared to same period last year. Power division also followed upward trajectory where production of Transformers, Energy Meters and Switch Gears increased by 16.81%, 63.81% and 186.91%, respectively. The Company has continued to focus on enhancing its product slate and recently made a strategic alliance with a renowned Japanese electronics manufacturer “Panasonic” which will authorize PEL to locally assemble Panasonic’s split air conditioners which is a positive development. Going forward the Company is expected to receive benefits from (a) Growth in population (b) Government incentives to construction industry and launching of Naya Pakistan Housing Program (c) Government initiatives to improve existing electricity distribution network.
The ratings are dependent on the management’s ability to sustain operations and sales in prevailing challenges. Meanwhile, any significant deterioration in sales and margins will impact the ratings. Close monitoring of working capital requirements to improve cash cycle and debt servicing remains imperative. Managing liquidity and financial risk are crucial for the ratings.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com